French budget minister in tax fraud probe resigns

PARIS (Reuters) - French Budget Minister Jerome Cahuzac has resigned from his post after being targeted in a tax fraud inquiry, the president’s office said on Tuesday.

France's Junior Minister for Budget Jerome Cahuzac attends the questions to the government session at the National Assembly in Paris February 12, 2013. REUTERS/Charles Platiau

The announcement - a major embarrassment for President Francois Hollande’s government - came hours after French prosecutors opened a formal investigation into allegations that the junior minister held a secret bank account in Switzerland.

Cahuzac, who is leading a government crackdown on tax evasion, has repeatedly denied a report in December by French investigative news website Mediapart that he held an undisclosed account at the Swiss bank UBS until the start of 2010.

The brief presidency statement said the move came at Cahuzac’s own request. It named Europe Minister Bernard Cazeneuve as his successor.

Earlier, the public prosecutor said police laboratory tests showed a correlation between the voice of Cahuzac and that in a recording of a telephone call published by Mediapart, in which a male voice acknowledges holding an account at UBS.

“In other words, the result of our analysis reinforces the hypothesis that Jerome Cahuzac is the unidentified speaker,” the office of the Paris prosecutor said in a statement.

French prosecutors opened a preliminary investigation into the affair in January, but this step takes the inquiry to a new level and will involve deploying greater resources to the case and cooperation with other judiciaries, notably in Switzerland.

Cahuzac, a former plastic surgeon who rose to prominence as the Socialist Party’s toughest budget-watcher, has led efforts to crack down on tax evasion and fraud by French citizens seeking to avoid high levies at home.

His resignation could hardly come at a more sensitive time as Hollande’s government is in the process of redrafting deficit reduction plans vital to maintaining fiscal credibility with France’s euro zone partners.

Weaker-than-expected growth forced the government to abandon Hollande’s pledge to cut the public deficit to an EU-imposed ceiling of 3 percent of economic output this year, tumbling a key pillar of Cahuzac’s fiscal policy.

His replacement, Cazeneuve, is familiar with the inner workings of Brussels as Europe Minister. That could help Finance Minister Pierre Moscovici as he tries to convince the European Commission and other euro zone countries that France should get more time to meet its deficit target.